Study: 274 businesses could go bust

Jul 16 2012

Hundreds of retailers and hoteliers are at serious risk of going out of business in the next year, according to the trade body for insolvency professionals.

Research by R3 found 274 retail businesses and 30 hotels had a high risk of going bust within the next 12 months.

Analysis showed there are a further 1,238 retailers and 137 hoteliers who are vulnerable to failure over the same period. This means that 26.15% of retail businesses and 17.99% of hotels in Scotland are at some risk of failure.

Scottish R3 spokesman Iain Fraser said: "It is not likely to surprise anyone that the retail and hospitality sectors are vulnerable. Retail, as has been widely reported, is suffering both from a lack of consumer confidence coupled with systemic changes to the way in which people buy products.

"The shift to online purchasing is greatly affecting retailers, many of which have not effectively moved online. Whilst there will always remain high street retail outlets, their composition, offerings and delivery have changed dramatically over the last ten years and will continue to do so.

"Those retailers that do not respond to these changes will, unfortunately, cease to exist."

He added: "There also remains the extremely difficult economy which, even for those businesses that are successfully adopting new technologies, poses a challenge for all businesses. There remains some way to go before the economy recovers and, until that time, retailers offering niche or non-essential products will face troubling times."

In the hospitality sector, hotels also face challenges in maintaining room bookings without just slashing prices, Mr Fraser said.

The research was compiled using the Bureau van Dijk Fame database. Businesses classed as "at risk of failure" are defined as having a QuiScore below the normal band of 37-56.

The QuiScore, ranging from 0 to 100, is a measure of the likelihood of failure in the 12 months following the date of calculation. Companies with a high risk of failing would fall in the 1-18 band.